The controversy is mostly about what purpose the bond was meant to serve (i.e., what kinds of damage it should protect Google against). Google basically claims that Microsoft defines the purpose too narrowly and argues that it was never just about FRAND royalties. Microsoft points to Judge Robart's May 14, 2012 order granting a preliminary injunction, which said that Google "must wait until this court has had the opportunity to adjudicate [the availability of injunctive relief]", and in the very next sentence says Microsoft had to post the bond "to compensate Motorola for its losses in the event that this injunction is reversed or vacated". The anti-enforcement injunction was affirmed by the Ninth Circuit, and injunctive relief was ruled out by summary judgment. But again, the final district court ruling can still be appealed, so an adjustment of the bond is more likely than a release without any replacement. The one thing I can't imagine is that the $100 million bond stays in force -- the amount makes no sense now that a rate-setting decision has established the limited commercial value of Google's (Motorola's) H.264 and IEEE 802.11 SEPs. We'll probably know the decision soon because the court will hold a hearing by telephone today.

Microsoft also notes that an FTC consent decree requires Google to "cease its [SEP-based] injunction efforts".

The most interesting part of Microsoft's reply brief is this paragraph (the penultimate one):

"Thus, as it stands now, Motorola continues to insist on an out-sized bond to protect against 'damages' stemming from being unable to obtain injunctions against Microsoft that Motorola has no right to have entered. Motorola's refusal to release the bond is further evidence of Motorola's hold-up tactics, evidence that the jury should be able to consider when evaluationg Motorola's breach of contract."

The breach-of-contract jury trial will start in about two months (late August 2013). If Microsoft gets to present this "evidence of Motorola's hold-up tactics" to the jury, Google may actually regret that it didn't simply accept a release of the bond or reduction of the amount. It just doesn't look too good to independent observers that Google, after all that has happened, still wants a $100 million bond.

The total amount of all bonds Microsoft had to post in the U.S. and Germany to enforce injunctions (the anti-enforcement injunction to preclude FRAND abuse as well as its own non-SEP injunctions) against Motorola Mobility was in the hundreds of millions of dollars, but one of the German bonds was adjusted in November and Google's Motorola consented to the reduction of another bond (due to the bankruptcy of a Motorola co-defendant, a 38.5 million euro bond has yet to be adjusted to 6.5 million euros).

Motorola's litigations have also required Apple to post (for some time now) 2.25% of its German sales receipts of 3G-capable devices. Under the German Orange-Book-Standard procedure allowing defendants to avoid injunctive relief over patents subject to compulsory licensing, a willing licensee has to pay royalties, or provide security to the amount of such royalties, as if its offer to take a license had already been accepted. In this particular case, Motorola actually accepted the offer in April 2013. At a FRAND rate-setting trial held by the Mannheim Regional Court on Friday it was pretty clear that Motorola isn't going to be awarded 2.25% of Apple's sales. The court is going to focus on the intrinsic value of Motorola's cellular SEPs and subtract hold-up value from Google's demands. But until there is a rate-setting decision, Apple has to make payments or give security to the amount of 2.25% of its German sales of 3G-capable devices only because that was Motorola's initial demand. This is a very significant and, in my view, unreasonable liquidity cost. Apple can afford it, but there's no good reason for this -- and other defendants in such cases are generally less well-heeled than Apple. It would be a mistake in such contexts to focus on what the Apples, Googles and Microsofts of the world can do. These disputes have further-reaching implications also for smaller players and companies of all sizes that are, unlike Apple and Microsoft, tight on cash.

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About Me

Florian Mueller is an app developer who used to be an award-winning intellectual property activist. His 30 years of software industry expertise span different market segments (games, education, productivity and infrastructure software), diverse business models, and technical and commercial areas of responsibility. In recent years, Florian advised a diversity of clients on the patent wars surrounding mobile devices, and on their economic and technical implications. (In order to avoid conflicts of interest, Florian does not hold or initiate transactions in any technology stocks or derivatives thereof, except that he is long AAPL.) He is now developing games for smartphones and tablet computers.